PPP in Solid Waste Management. EIB Approach to support Circular Economy and to mitigate Climate Change

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1 PPP in Solid Waste Management EIB Approach to support Circular Economy and to mitigate Climate Change European Investment Bank Dr. Patrick DORVIL

2 Agenda The EIB: The EU Bank European PPP Expertise Centre (EPEC) EIB Priorities outside the EU External Investment Plan: The 3 Pillars Example: ISWM in Jujuy Argentina SWM in Low- and Middle Income Countries PPP in SWM

3 The EIB: the EU bank Natural financing partner for the EU institutions since 1958 Around 90% of lending is within the EU Shareholders: 28 EU Member States Investing in Europe s growth

4 EIB Group financing in 2017 EUR78.2bn EUR 250bn Total investment supported

5 Climate finance pioneer EUR 19bn for climate in 2017 USD100bn

6 EIB Group financing in 2017: EUR 78.16bn Signatures EFTA & Enlargement Countries EUR 1.62bn Eastern Neighbours EUR 0.88bn EUR European Union 70.24bn Outside EU EUR 7.91bn Africa, Caribbean, Pacific, South Africa EUR 1.47bn Asia, Central and Latin America Total EUR 78.16bn Mediterranean EUR 1.96bn EUR 1.99bn

7 The European PPP Expertise Centre PPP Advisory Services to the Public Sector Share good PPP practice through network activities: Providing market intelligence Addressing practical issues in implementing PPPs Developing PPP guidance and tools Assist PPP policy development e.g.: PPP legal and regulatory frameworks PPP institutional arrangements Processes for preparation and management of PPPs Support PPP project preparation, offering high level strategic advice, e.g.: Making the PPP decision PPP project analysis preparation Use of transactions advisers

8 EIB Priorities outside the EU Private sector development Social and economic Infrastructure Security of energy supply support the implementation of the EU external policy, promote sustainable growth and employment Environmental sustainability Climate Action: transversal policy 28% of EIB loans in developping countries

9 EIB products: We help catalyse investment LENDING BLENDING ADVISING Loans But also: Guarantees Equity participation Combining EIB finance with grants, i.e. from the EU budget: High impact finance Higher risk projects for innovation Prepare, evaluate and support the implementation of projects/ investment programmes Support for public/private partnerships Capacity building Attracting FUNDING for long term growth

10 Blending EU grants for external cooperation EU Regional blending facilities European External Plan (2017) EFSD Africa Investment Platform Neighbourhood Investment Platform

11 Technical Assistance pillar of the External Investment Plan Three pillars of the EIP, including Technical Assistance Source: EC

12 Blending operations under EU Regional Blending Facilities ( ) Annual grant approvals (in million) Grant approvals by sector (in %) Thematic AfIF IFP CIF AIF IFCA LAIF ITF NIF Urban development ICT Mixed Agriculture Social Private Sector Environment Transport Energy 1% 1% 1% 3% 3% 12% 17% 22% 41% 0% 10% 20% 30% 40% All facilities grant approvals to 380 operations 3.4 billion Average: 9 million per operation 1 Regional Banks (AfDB, IADB, CDB, ADB,...) and WB/IFC are NOT included Source: presentation EC, Working Party on Development Cooperation December 7 th, 2017 EFIs financing to approved projects ¹ * 26.2 billion Leverage: 7.7/1 Total investment amount 57.3 billion Leverage: 16.8/1

13 Integrated Solid Waste Management in Jujuy /Argentina Project need Current solid waste management situation in the province o o Very low collection rate (15%), generally no selective waste collection Disposal in dumpsites o Increasing costs of urban sanitation, sanitation treatment, water purification Main project objectives: Improve the quality of life of the population in the Province of Jujuy Tackle climate-change related issues: o reduction of greenhouse gases o proper management of urban solid waste. LAIF grant: IG close financing gap of project cost TA project preparation, implementation & monitoring and strengthen capacity of Promoter 15/09/2017

14 SWM Jujuy / Argentina: LAIF added value LAIF grant contributes to environmental and social benefits: Direct additionality LAIF grant - Project scale, timing and project sustainability: LAIF grant will close financing gap of project cost and ensure all project components completed hence IWMP operational in due time. Financial leverage: o Investment leverage ratio is 7.7:1 o FI leverage ratio is 4.95:1 Job creation: o Temporary employment: approx person-years during the implementation period o Permanent jobs: approx. 200 jobs.

15 SW in LMIC: Market and Financial Burden SW expenses in ACP/OCT: USD 46 bn per annum; Market Gap: Additional USD 40 bn; Municipal Authorities: Lack of technical expertise; No direct Access to credit for public works; No Consequences of increasing disposal fees, so landfills lose money; As a consequence: Illegal dumping, inadequate disposal Need for sound financing framework: PPP / PSP

16 SW-PPP Framework: SWOT Analysis Strengths Faster responses to investment needs Innovative Accountability for the provision of service Reduction of public debt Weaknesses Market Fluctuations (recycling material) Principal-Agent Dilemma Inter-organisational Relationship Lack of regulatory framework sometimes Higher financing costs Opportunities EU Directives, EU Targets Sustainable Development Goals in LMIC Waste framework Directive Circular Economy target Payment Mechanism: Profit sharing Tight public budget Threats Economic life of the assets Accessibility of Information Public contract monitoring Lack of long-term competition Re-municipalisation

17 Rationale PPP in SWM: Rationale and Issues Faster response to the needs in environmental infrastructures, new capital investment, access to technical know how and cost efficiency; Risk sharing, Innovation; Engine for economic growth and sustainable development; Opportunities for private entrepreneurs and chance for public sector to outsource non core activities; Foreign Direct Investment (FDI), tight municipal budgets, transfer of managerial and technical know how. Issues Long term Transaction costs; Monopoly: Public oversight requirements; SWM: Merit goods, non exclusive, non rival; Equal access, affordability and the guarantee of the continuity of service;

18 Key Messages Major needs and investment opportunities: Increase lending (private, public, PPP, etc.); Use waste as a resource: Circular Economy; Strengthen energy recovery, and tackling of climate change; Consider climate change related parameters and risks in our economic project appraisal criteria; Circular Economy entails Technological and process innovation Financial innovation may also be required to create the financial products that can sustain Circular Economy related investments Investment Plan for Europe: Creation of a window of opportunities for assessing whether new financial instruments could be better tailored to Circular Economyrelated investments Joint EU EIB financial instruments such LAIF / AfIF/ EIP could be used to support EU s policy on circular economy and enable further transition

19 More information at: Tel.: